Column: Pay equity changes are coming

      While there has been growing momentum on the issue of pay equity for years now, the Biden Administration is making it clear that the momentum will materialize into actual changes in the law on the federal front. As such, it is critical that commercial businesses and federal contractors take proactive measures now, including conducting proactive pay analyses with legal counsel, in an effort to prepare for the changing landscape on pay equity. Federal actions

      Despite being enacted nearly 60 years ago, the Equal Pay Act of 1963 (EPA) has failed to close the gender pay gap, and a number of lawmakers have vowed to take action. Attempts to change the law have failed for years, but with Democratic control of Congress and the White House, amendments now are highly likely. Specifically, the Paycheck Fairness Act (PFA), which previously faced Senate resistance, is expected to be approved.

      The proposed law is intended to address loopholes in the EPA and to expand employer obligations. For example, the PFA would create a federal ban on requesting a job candidate’s prior salary history and would make it easier for employees to pursue individual and discrimination-based collective/class actions against their employers.

      Additionally, under the EPA, an employer may pay a male employee more than a female employee if the disparity is based on a “factor other than sex,” which currently includes a broad range of factors. The PFA would narrow the list of permissible factors to only “bona fide factors other than sex,” such as education, training, or experience. Notably, these changes would likely open the door for more lawsuits by employees challenging employer compensation decisions.

      President Biden has also signaled his intent to restore Obama-era rules that required certain employers to collect and disclose compensation information to the federal government. The intent is to provide better insight into pay disparities and to target enforcement.

      Particularly noteworthy for federal contractors is Biden’s appointment of Jenny Yang as director of the Labor Dept.’s Office of Federal Contract Compliance Programs (OFCCP). She previously served on the Equal Employment Opportunity Commission and was recognized as a fierce advocate for pay equity and closing the gender wage gap, spearheading the Obama Administration’s effort to collect pay data from federal contractors and other employers through Component 2 of the EEO-1 form.

      Moving forward, there is little doubt that heightened scrutiny on pay practices will be a focus—if not, the focus—of the OFCCP and the Biden Administration, generally.

Patchwork of State Laws

      Employers also need to be wary of the growing patchwork of state pay equity laws imposing different requirements on employers. These are especially challenging for employers as they must ensure compliance with the laws of each and every state in which they operate. Nearly every state has some form of pay equity laws on the books, but each has its own scope and own set of obligations.

      For example, Colorado is the latest state to begin enforcing its own pay equity law—the Equal Pay for Equal Work Act, which became effective Jan. 1. It requires employers in the state to include pay and benefit information with each job opening post and to communicate promotion and job opportunities to all current employees working in the state.

      Additionally, also effective Jan. 1, California has new requirements that call for employers with one or more workers in the state and 100 or more companywide to submit a full equal opportunity and wage report to the state by March 31 each year.

      Until and unless there are significant changes made on the federal level, we expect states to continue to take matters into their own hands.

Conducting Proactive Pay Analyses

      With equal pay protections expanding and with a heightened emphasis on pay equity on both the national and state level, employers should be especially diligent in identifying and rectifying unjustified pay disparities. One of the best ways to do so is to consider undertaking a pay equity audit. Conducting a proactive pay analysis will position your company to determine, at the very least, whether any unjustified pay disparities exist, where those gaps are, and any remedial measures that need to be taken to help mitigate any risk of liability.

      Conducting pay audits is not only good practice—it can actually provide an affirmative defense against claims of discrimination. Some states that have enacted pay equity legislation include safe harbor provisions. These measures provide employers that conduct a good-faith audit and make reasonable progress in eliminating wage disparities with potential relief from liability and liquidated damages.

      Notably, engaging legal counsel to lead the effort has the added—and critical—benefit of attaching the attorney-client privilege to protect the confidentiality of any results and analyses. Engaging legal counsel at the outset of your audit process can ensure protection from disclosure in the event of an OFCCP audit or employee lawsuit. Beyond the analysis itself, legal counsel can also assist in reviewing and drafting policies pertaining to decisions surrounding pay practices, as well as help with diagnosing and responding to existing disparities. Conducting proactive, privileged pay analyses will give your company the information and strategies it needs to make appropriate pay adjustments and identify and fix systemic compensation practices to prevent future disparities.

Nichole D. Atallah and Sarah L. Nash are partners, and Sara Nasseri is an associate, with PilieroMazza PLLC law firm. This article was reprinted with the permission of PilieroMazza PLLC http://www.pilieromazza.com Should you need any assistance navigating the many updates on the pay equity front, or if you would like to discuss conducting a proactive pay equity analysis for your workforce, please contact a member of PilieroMazza PLLC’s Labor & Employment Group.

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Column: Pay equity changes are coming

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